Last week, all the lawyers involved in the Prenda Law debacle showed up to federal court in Los Angeles—and said nothing. Instead, they choose to plead the Fifth. The judge ended the hearing in less than 20 minutes, storming off and saying he would draw his own conclusions about the lawyers involved in the copyright-trolling operation.

Prenda is a legal firm that has used questionable tactics in suing people they allege to have illegally downloaded porn titles, and it has found itself under scrutiny over the past few months for its potentially extortionate practices. That scrutiny has intensified since it was discovered that two of Prenda's clients, AF Holdings and Ingenuity 13, could not confirm the existence of one man that appeared to lead both companies: Alan Cooper.

Key Prenda lawyer Paul Hansmeier, like his colleague John Steele, lawyered up and refused to talk at the April 2 hearing. Today Hansmeier filed his response on paper, attempting to explain why he shouldn't be sanctioned despite the fact that he's not willing to shed much light on the whole situation Prenda Law finds itself in.

"Hansmeier's invocation of the Fifth Amendment may not be use[d] to formulate presumptions against him," because the court has "raised questions of fraud and potential incarceration," states Hansmeier's lawyer in the response.

When US District Judge Otis Wright chose to focus his attention in the "Ingenuity 13" case on attorney misconduct rather than intellectual property rights, the matter became more similar to a criminal proceeding than a civil one, Hansmeier argues.

The brief directly takes on Wright's assertion that he'll assume the worst based on the non-answers coming from Team Prenda. And there's no justification for sanctions, argues Hansmeier's lawyer, Philip Baker.

What was Brett Gibbs up to? No idea.

"There is simply no tie between Hansmeier and the issues raised within the court's order to show cause," writes Baker. As for Gibbs, the lawyer who was on-record as representing Ingenuity 13, he "was neither employed nor supervised by Hansmeier in connection with this matter."

That means that Wright shouldn't sanction Hansmeier, Baker says, either under Rule 11 (the section of the federal litigation rules related to attorney misconduct) or under his "inherent powers" as a federal judge. Sanctions would be "inappropriate" since Hansmeier wasn't supervising Gibbs in any way and never "had any malicious intent or otherwise acted in bad faith" regarding any of the activities in Judge Wright's order.

Who's Alan Cooper? Who owns AF Holdings? No idea.

One of the key points in Judge Wright's order is that he wants more information about the allegations of identity theft related to Alan Cooper. In another remarkable recent filing in the Ingenuity 13 case, Prenda lawyers have accused Cooper of being mentally ill.

Hansmeier says he's had no contact with Alan Cooper and "played no role in the acquisition of Cooper's signatures" on the corporate documents. And "there is no evidence that Hansmeier obtained or represented that the signatures on the assignments over the name Alan Cooper were those of John Steele's former caretaker, who bears that same name and provided testimony to the court."

But that doesn't answer one of Judge Wright's key questions, which is whether or not there is more than one Alan Cooper.

Hansmeier also dodges the question of who has any financial interest in AF Holdings or Ingenuity 13. He cheekily states that "the duty to disclose a financial interest is necessary for a single purpose, to allow the court to determine whether it is necessary to disqualify or recuse itself."

"The only evidence given regarding the financial interests to AF Holdings is that it is a limited liability company formed by Aisha Sargeant in May 2011 and is wholly owned by a trust with no defined beneficiaries. There is no evidence that Hansmeier has an ownership interest in either AF Holdings or Ingenuity 13."

Of course, the reason there is no evidence about who owns AF Holdings is because Hansmeier himself won't cough up the information. In his deposition, he called it an "undefined beneficiary trust" and said he couldn't name a single owner of it—despite the fact that, according to AF Holdings, Paul Hansmeier is the most qualified person to discuss the business of AF Holdings.

Hansmeier similarly dodges other key questions in the response he filed today. Why didn't he notify the court about related cases? There's "no evidence [he] participated in the decision"—it was all Gibbs. Why didn't he show up to the March 11 hearing? He didn't get enough time. He was served on March 7, "less than two business days before the hearing."

87 Reader Comments

As individuals, they have the right to remain silent. That's generally incompatible with continuing to be officers of the court. And it can be used, just as an adverse inference in civil cases, to conclude that they were abusing their position as officers of the court, which can lead to sanctions.

The inference can be made, of course, and the judge can choose to sanction them for the accusations, and use said accusations to rule that they weren acting improperly, but again, the sanctions would not be for pleading the fifth, they would be for the violations of their job as attorneys) This is, again, a rather large difference...and honestly, as much as I hate Prenda (and other attorneys who bring scorn and derision upon the profession), the judge making a declaratory ruling that they DID act improperly based on the limited data would strike me as a very bad choice.

Again, punishing them based on accusations and limited evidence (the word of Alan Cooper) in a trial that does not actually involve Alan Cooper would be highly irregular. It would be grounds for a lot of legal arguments that would delay and obfuscate a more powerful case against them. As such, while yes, it's possible that Prenda will face sanctions for not be faithful officers of the court, such sanctions would still be argued by Prenda to be a punishment for pleading the fifth, and would bog down this case AND any case that was the result of the same just instigating investigation into their work.

Now, they could (and possibly should) face sanctions for continuing to send letters after the judge ordered a halt. That's largely unrelated to the Fifth Amendment issue (and would only apply to the people who signed off on them). Even that, however, is just opening the door, and if nothing else, the Prenda folks have demonstrated they're willing to slime their way into any crack.

As a person who wants Prenda to be fully exposed, my personal hope is the judge will not sanction them. The case will be tossed at the request of Prenda, the judge will rule that due to lack of standing he's tossing it with prejudice (so the can't re-open it), and then pursue his other options. Namely, he'll make some calls to any State bars where these guys work, push to have them removed from trying Federal cases, and see about getting others to get a Grand Jury convened to open up a Federal case against these clowns. If that happens, there isn't any bias or conflict of interest argument that would stand up.

I say let these guys fry. But the best way to do that is to not proceed with any sanctions, and let them face justice for their crimes.

This looks and smells like a RICO conspiracy. There is something called civil RICO. Either way, unless something has changed in RICO, actual conduct only has to be proven against one conspirator. Under RICO, anyone being paid by a defendant, in this case, the alleged owners of the films, has to show that they are not being paid with ill gotten gains by the RICO conspiracy.If no one is home at the defendant, who is signing checks in this scheme? Are funds only being transferred electronically or is paper changing hands? There has to be a trail if money is being moved into the US, as into attorneys' accounts. How can the IRS verify that taxes are being paid on income being generated by these settlements and salaries?

The Judge doesn't have to even look at their 5th pleading. I think he was just trying to draw out a confession from them at that point. He has plenty of ammo to levy sanctions based on Prenda's actions alone.

Operative Alex wrote:

D.Becker wrote:

Except they aren't clients or defendants, all of the people here are part of the law firm that brought the case. They are officers of the court, and have an obligation to answer.

No, they don't. They have a constitutional right to decline to answer questions if they believe those statements could be used against them in a court of law. If I'm representing a client, and a judge demands to know if I murdered someone, I can absolutely, positively decline to answer on fifth amendment grounds, and not have it held against me. Not answering means that the judge can draw conclusions about their standing to sue, but he cannot, constitutionally, take it as an admission of guilt, or punish them for invoking those rights. That would produce a chilling effect on the fifth amendment, and create a very good defense for Prenda.

I'll try to simplify this: They brought a case. The other side said "these guys don't have standing to sue because they are committing fraud". The judge asked "are you guys committing fraud?". Prenda declined to answer on fifth amendment grounds.

That's their right. It is absolutely, inviolately their right. The judge CAN decide that without their testimony, the evidence shows that there is reason to believe Prenda does not have standing, and toss out the case with prejudice. He cannot, however, sanction them for not answering. (There are other things he CAN sanction them for, but as I've tried to explain, if you want Prenda to go down, this is a bad idea).

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They were using the courts power to subpoena, and continued trying to get the information after the subpoena was quashed.

Which has nothing to do with their fifth amendment rights. They simply declined to answer. The judge, again, can look at all the evidence and make a decision based on it, and sanction them based on the fact that they didn't provide any evidence to disprove this. He can sanction them for that. But he cannot sanction them for not answering.

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They are now refusing to answer any questions about how that happened, or reveal who the actual client is.

Which will likely result in the case being tossed out as there is evidence from the defense that they dont' have standing, and Prenda did not provide any counter-evidence. A judge can RULE based on available evidence. This is different from PUNISHING based on refusal to answer.

Here, I'll try a different example to explain the difference.. You have two kids, Bob and Susan. Sue comes home and says "Bobby hit me". You ask Bobby if he did it, and he refuses to answer. There is a difference between saying "well, because he didn't answer, I believe Susie, and I'm punishing him for hitting her, since that's what the evidence shows" and saying "well, he didn't answer me, so I'm going to punish him for that." In law, this distinction is HUGE.

The Judge doesn't have to even look at their 5th pleading. I think he was just trying to draw out a confession from them at that point. He has plenty of ammo to levy sanctions based on Prenda's actions alone.

I've already talked about this. Yes, he can. I still contend it's a really bad idea to. The only thing that I think would be relatively clear-cut is sanctions over the sending of letters after the judge put a halt on that, and that only applies to a few individuals, according to their own briefs. However, any sanctions at all will likely be argued by Prenda to be punitive. So why open the door for them to do it?

At this point, the judge appears to just be dragging out the case to wring as much info as possible while also giving others time to launch investigations. The best thing he can do after that is to issue no sanctions...and let a Federal investigation into their work do what he cannot.

It's probably important to keep in mind that although the fact that you plead the 5th is not to be used against you in criminal proceedings you may face, it can certainly be used against you in civil proceedings. The ability for any of them to hold on to a shred of credibility when Alan Cooper's claims against them are heard in court is pretty much gone.

Operative Alex wrote:

I've already talked about this. Yes, he can. I still contend it's a really bad idea to. The only thing that I think would be relatively clear-cut is sanctions over the sending of letters after the judge put a halt on that, and that only applies to a few individuals, according to their own briefs. However, any sanctions at all will likely be argued by Prenda to be punitive. So why open the door for them to do it?

At this point, the judge appears to just be dragging out the case to wring as much info as possible while also giving others time to launch investigations. The best thing he can do after that is to issue no sanctions...and let a Federal investigation into their work do what he cannot.

Sanctions are not just levied against the attorney whose name appears on the offending legal instrument - though there is a great deal of significance to that. They are attesting with that signature that whatever document or action is attached is appropriate under the rules but their firm and any attorneys who collaborated in the associated misconduct or witnessed and allowed it to proceed may also be subject to sanctions. Otherwise it would not be an effective deterrent as firms could conspire to commit misconduct and isolate any liability to the one attorney whose signature was directly tied to it. The discretion to broaden sanctions to fellow attorneys, entire firms, and even clients is long acknowledged and considered necessary for the sanctions to serve any meaningful deterrent effect.

Also there seems to be some confusion as to what constitutes sanctions here. That includes everything from fines, referral to professional disciplinary action, declaring actions to be contempt, and even just involuntary dismissal of the complaint with prejudice. It seems to be forgotten that dismissing with prejudice is levying sanctions - and that it can also be quite costly to the plaintiffs when it happens. What fines or other penalties are levied are quite broad

Operative Alex wrote:

SpecTP wrote:

The Judge doesn't have to even look at their 5th pleading. I think he was just trying to draw out a confession from them at that point. He has plenty of ammo to levy sanctions based on Prenda's actions alone.

I've already talked about this. Yes, he can. I still contend it's a really bad idea to. The only thing that I think would be relatively clear-cut is sanctions over the sending of letters after the judge put a halt on that, and that only applies to a few individuals, according to their own briefs. However, any sanctions at all will likely be argued by Prenda to be punitive. So why open the door for them to do it?

At this point, the judge appears to just be dragging out the case to wring as much info as possible while also giving others time to launch investigations. The best thing he can do after that is to issue no sanctions...and let a Federal investigation into their work do what he cannot.

The thing that he could most easily levy sanctions against them for would be the violation of the court's order to cease discovery - after which they continued to receive subscriber information under then-invalid requests. The impetus to deter such future misconduct is quite clear and I don't think they will find much sympathy from other judges when they try to argue it is inappropriate to punish them for disregarding the orders of the court. I know that gets forgotten in the midst of he much more titillating details (or lack thereof) that have tickled out since then, but it is far from trivial. Sanctions carried out under violation and rule 11 as well as the violation of rule 37 which might come up if the judge decides the lawyers disobeyed or inappropriately acted to thwart a discovery order would be normal in this case and include the dismissal with prejudice.

Also might be worth noting that as the power to sanction is meant to be a deterrent against misconduct throughout the legal community first and punitive second, sanctions that result from misconduct are meant to be able to be applied with some discretion to firms as a whole which fail to prevent misconduct of their members and even less formally associated attorneys who could reasonably be assumed to have known about and not acted against the misconduct. Sanctions being extended to clients is not unheard of and when those clients are also attorneys who have worked closely with those most directly involved in perceived misconduct, it would not be surprising for them to be treated as complicit in the misconduct. If the sanctions are appropriate, it is not necessary to be able to demonstrate specifically whether such complicity was by dereliction or participation specifically. It need only be clearly most reasonable to believe it was one or the other than that the situation was such that any ignorance would be seen as something besides willful; remember the standard of proof for the sake of these sanctions is notably less than "beyond reasonable doubt." The standard of "clear and convincing evidence" here really means that the judge here and any to whom sanctions might be appeals would merely have to believe it far more likely to be true than not with a firm confidence in it being so.

I do agree that it is most likely and would be best that the extent of any sanctions coming directly from this court be in line with can be reasonably argued as being demonstrated by clear and convincing evidence. this means that sanctions against Steele and others who did not act directly in the misconduct will likely have to be limited to things appropriate for allowing the misconduct rather than directly perpetrating it. As long as any sanctions are within the realm of reasonableness and not too unusual for what specifically they are for, the the judge should not have too much problem applying them. Any more significant cost to them for their involvement would have to come from the absolute destruction of their credibility - a self inflicted wound - as well as whatever may come out of a prosecutor's office going forward. Disbarment would only likely come after a criminal investigation or further misconduct on their part, but their actions in this case would certainly weigh against them in any such hearing.

What will be very interesting to watch is their clear throwing of Gibbs under the bus plays out. If there is a criminal investigation - or even a professional disciplinary hearing - it will most likely focus first on the one who they have laid the blame on in their subsequent briefs to the court. If enough pressure is put on Gibbs then he may find it preferable to agree to a plea deal in exchange for testimony against pretty much all of them. Now I'm sure Steele and the rest are hoping that any damaging testimony he might be able to provide would be inadmissible as he was nominally a client of his at various times. Here's where it gets interesting, attorney client privilege does not apply to conversations and information exchanged in the furtherance of ongoing criminal activity or fraud. This means that if Gibbs knew that Cooper's identity was used fraudulently then that much of the communications with Steele after that point regarding the furtherance of that fraud as well as any ongoing criminal activities he was aware of and willing to admit knowledge of would not be protected by privilege. Granted this is something that kills your career as an attorney even if technical correct, but if they throw him under that bus hard enough and the pressure from defendants seeking fines and criminal investigations gets serious enough it might be preferable to him than serving as the scapegoat.